Risk, Uncertainty, and Legal Problems. How Do SMEs Use Law?

Paper presents the theoretical framework aiming to explain patterns of decisions to use law in small and medium enterprises (SMEs). It informed an extensive empirical, quantitative and qualitative study of aspects of decision-making in SMEs, conducted in 2017. Two traditions of theorizing in social sciences inspired this project. Luhmann's systems theory delivered most conceptual tools, allowing to theorize organizations, forms of decision-making, structures of legal communication, types of communication within economic system and other relevant function systems. Paths to justice paradigm, originating in empirical legal studies on "access to justice", enabled operationalisation of legal phenomena for the purposes of empirical research and provided insights about the multiplicity of forms of legal communication in professional and non-professional contexts.

In this vein, using law - ie. consulting lawyers, drafting legal documents, going to court, using other forms of dispute resolution, or resorting to many other types of legal communication, formal and informal - was conceptualized as an outcome of processes of risk and uncertainty management in organizations observing their multiple environments. This led to an observation that decisions in SMEs to use law presuppose a transformation of the observed uncertainties into internally calculable risks. These are further mediated and re-allocated within organization itself or transferred to other entities. Such processes differ depending on type of organization, its available resources and the source of contingency.

The framework suggests that decisions to use law are different in businesses of different size and structure, family-run businesses and corporations, depend on the branch of economy and relative position of a business in the market. The paper also stresses, that contrary to a belief expressed by some theorists, the law is itself a source of contingency for SMEs. This makes it possible to observe different forms of contingency-to-risk transformation, including transformations using law, as competing decision-making opportunities.